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Squawk on the Street

News/Business. Melissa Lee, Carl Quintanilla, David Faber. Opening bell market action. New.

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Us 25, Dell 18, At&t 13, China 10, Boeing 9, Google 9, Europe 9, Carl 8, U.s. 8, Jim 7, Blackberry 6, Simon 6, Cramer 6, United States 6, Sheila Bair 5, Asia 5, California 5, Verizon 5, Mary Thompson 5, Blackstone 4,
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  CNBC    Squawk on the Street    News/Business. Melissa Lee, Carl Quintanilla,  
   David Faber. Opening bell market action. New.  

    January 22, 2013
    9:00 - 12:00pm EST  

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>> and what is your contention about mr. ward? >> look, i think our concern has been the assets we think have a lot of value. overhead spending, triple many of its peers, highest of any of the company's peers. part of that is compensation, it's all the usual stuff, perks, jets, et cetera. this company is the worst performing stock since the ipo. book values are down 70%. the stock is down over 70%. his pay has been $16 million every year. essentially when you kick high interest expense and high overhead, the company burns huge amounts of value through all of the excess spending. even if you have the good transaction and a good investment, you lose it through the overhead. from our perspective, you need to cut that overhead. you need to focus, so when you get a good result in your oil investments --
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>> it's got to leave, though? >> i think so. conceptually you would hope someone could reform. but when you look at what he's done, the signs aren't good. he hasn't changed his pay. they give an indication of a ceo that doesn't care about shareholders. >> thank you for coming in today. make sure to join us tomorrow. right now it's time for "squawk on the street." good tuesday morning. hope you had a great three-day weekend. welcome to "squawk on the street." i'm carl quintanilla, with melissa lee, jim cramer and david faber here. five-year highs last week, europe had strong investor confidence numbers in germany. but actually, was disappointed in the bank of japan. which we'll wait until next year before it targets a new inflation rate of 2%. our road map begins with what cramer calls the most important earnings week of the year for
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the quarter at least. a parade of dow components starting with verizon. a 12 cents miss dragged down by superstorm sandy. >> dupont 2013, a cautious year with the slow growth world economy. how worrisome are those comments from the economic bellwether. >> j & j exceeds estimates. the full year forecast a bit below the streets, as investors pay close attention to new ceo alex gorsky. the dow component reporting fourth quarter numbers of 38 cents. that was well below estimates. verizon said the results were impacted by superstorm sandy. we're just getting details now, david, on activations on things like the iphone, 6.2 million, not too shabby. >> the problem was not necessarily activations, carl. the key is simply that margins came in even worse than had been anticipated. this, after the company already guided them down a bit at the
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consumer electronics show a couple of weeks back. and there, of course, you're talking about operating koose i higher than anticipated. investors may be a little concerned today when you take a look at that chart there. now, listen, to carl's point, they're adding a lot of customers. they're activating a lot of devices. we talk often about the subsidy for the apple iphone, but don't forget there is also a subsidy for the samsung galaxy. when you've only got two devices to choose from, not enough competition for these carriers to say, no, we're not going to pay that much. that certainly would seem to be something here that investors are going to continue to pay attention to. the margins are the key here. we'll see. high multiple stock, 15 times, does have a nice dividend as you point out. investors may be looking closely at the margin number for their guidance for the year, despite
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what are some positive comments. >> we love the stuff. how does it change. how does the metric change. if we look at the fios numbers, they start making money on the dvr, no, now it's just wireless. >> you don't want to forget about the other important parts of the business. there's a wire line business, and that's where they took the sandy charge in terms of the wire line. the positive effects from the union deal that will start to be felt this year. but wireless is the key for this company. it's what moves the stock. it is the most important component by far. this is a giant player that has had extraordinary success, nonetheless, concern about what are the costs going to look like as this year goes along if this number is not a one off, which it may not be. >> how significant is it in terms of new contracts, customers taking a lead from at&t by about 20 million? >> i'm sorry?
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>> overtook at&t by 20 million. is that significant in this head-to-head race? >> it can be. in some ways, i think, melissa, others would argue, at&t and verizon versus apple and samsung, how much can we pull back some of the subsidy that goes into perhaps these margin numbers, what other things can we do to bring operating costs down as well. but there will be a read through to apple here. at least people will try to. perhaps a positive one -- >> that's what my take looks like. >> take caution there. don't read too much into it. nonetheless, that would be the take. >> we're going to get at&t this week. and apple. and maybe two other s&p companies. >> this is it. go to davos to avoid these -- oh, no, i'm here. >> ouch for those who go to davos. >> you were saying, jim, you were telling david before the show, you do not take this week off for a reason. >> you cannot take this week off. how do you do your job? this is it. will ray lewis take off super
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bowl week? i doubt it. look, i'll take the heat. i like ray. sorry. i like him. >> what a weekend of football. would you buy apple ahead of the earnings this week? >> i think it's fine. >> tempered enthusiasm. >> apple's fine. >> the price target this morning is 650. >> it's fine. it's cheap. it's cheap. >> all right. >> cheap stock. >> of the utxs, the coaches, microsofts, pg&es, do you have -- >> i think pg&e is do or die. he either blows away the number -- i think he blows it away, he does a good job. >> do you think this is do or die? now? >> mcinerney is in charge, he's got his hands full. j & j, i thought the quarter was fine. you've got a new ceo.
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verizon, selling that. what else do you have to do here? travelers is good. dupont. i'll make a strong case that dupont margins have bottomed. these are fine earnings. but i care about google tremendously. remember the last time google reported? >> yeah. interesting afternoon. >> yeah. what are you looking for up there? >> i'm looking for my google notes, trying to figure out where they were. i write them on different pieces of paper and i lost them. but i found them. >> what are you thinking? >> it's easier for people to track on desktops than mobile. so we go into this quarter really wondering what things are going to look like for google, and/or facebook. let's not forget that. i know that's not part of the sweep necessarily, but it's -- >> it still matters though. >> will you still see lower cpcs, cost per click. and of course, google has never been that shareholder friendly.
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does that matter. they don't do buybacks, they don't pay a dividend. they spend $12 million on motorola -- >> they open up north korea. they are like their own country. united states and google. >> and they're back in the map museum. >> the map museum. >> oh, yeah. >> you see larry on the subway with the glasses. have you seen this picture? riding the sweet train with the google glasses. >> i missed them. i'm on that train most of the time. when i'm not here, i'm on that train. >> how did you take away from your shopping time to go to that map museum? >> let's talk about dupont, posting operating earnings of 11 cents a share beating wall street forecasts. issuing a full year outlook above analysts' forecasts. the ceo did express some concerns about 2013. >> 2013 i think is setting up to
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be a cautious year. the question is, how will the u.s. economy respond? are we taking good steps around the debt? but the deficit has to be dealt with. and it needs to be dealt with in a matter of months. >> i guess the question, jim, here, is are they sort of sandbagging or preparing us for the worst? they did have to slash 2012 in october, so maybe they're preempting -- >> you come on tv, you've got to be statesman-like. you can't come in here and say, look, i think it's going to be good. she's just saying -- she's writing off europe. i think europe is stabilizing. they get a turn in asia. tio-2 was a disappointment. i think it's troughing. latin america really strong. ag really strong. i think it's actually gotten its groove back. >> in terms of the chemicals, performance chemicals were down by 15%, sales, electronics,
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communications also down. ag you mentioned, bright spot, up 18%. they've been talking for a long time about strong demand in latin america for seeds, which have been an add to the other agricultural names, like monsanto. >> finally you can see it. one of the things of the great ceo of ppg, he's been saying, some of the companies -- some of the chemical companies have stuck by commodity. i thought dupont had progressed to proprietary. this may be the quarter we start to think it's finally progressing. chuck is such a high end guy, he would never knock dow or dupont. but i took away the idea that the companies that were proprietary were much more chemical. remember, dupont -- >> you read the transcripts of these calls. they're going on right now. i believe 9:00 a.m. verizon also is in progress. >> do you read all the
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transcripts? >> no. >> i don't have any life outside of cnbc. >> you don't suspend shopping, do you? >> 6:00 a.m. saturday. >> where does the time come from then, in your -- >> i was up at quarter to 4:00 this morning -- >> you slept in, oh, good. >> over the weekend, they don't do mlk over in europe. they should, but they don't. wide open. i tweeted immediately. you can get up and follow my tweets. >> i get up about three hours later. >> 6:45? i haven't gotten up at that time since 7th grade. >> i was up earlier. >> you think. >> meantime, j & j, better than expected fourth quarter numbers. the medical products revenues and current year outlook short
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forecast. street wanted 549. >> if that stock comes in, you've got to buy it. end of story. throughout this period, there have been disappointment, disappointment, disappointment. the stock keeps going up. i think he's going to rationalize this company this year. i think gorsky is going to get rid of the divisions that have hurt the company. i want to own j & j. >> what's optimistic about the action is it's off just by less than a percent. on friday it closed at a record high. this is a stock that's just been going higher and higher after a long time of just sitting there. stocks performing really well. if it doesn't sell off on the back of this, it's doing fine. >> you have companies that disappoint and they bounce back so quickly. people want to be in. a stock comes off -- look at caterpillar.
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you know the caterpillar story. i thought it read poorly. you maybe thought the gigantic frog was not so bad. that could be down to 35.70 -- it didn't read well. >> it didn't read well. >> friday night ahead of the holiday -- >> the game plan. >> there's a note on a stock getting play as well. we are short of things to worry about, and long of liquidity, which tends to weaken the resolve of any bear. do you think there are a few things to worry about right now? china coming back? >> look, we have a couple of bad quarters come in. remember, we started strong with earnings, i think. but we found that the next, like ten days, we start recalibrating and saying, maybe things weren't that good. the bank stocks, they were good. and then we got some
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not-too-good bank earnings last week. retail banks i thought were good. i'm waiting for the semiconductors. intel's quarter was disappointing. it's a mixed picture. but i think intel didn't go down that much. boeing, when they reported, i bet you boeing up side, surprise. i found ge was good. i thought schlumberger was great. some companies not so great. it's a mixed picture. >> you mentioned boeing. interesting development in the investigation, the japanese reportedly focusing on the battery itself. and that supplier. u.s. regulators say the fire in boston, the battery didn't exceed its output standards, so maybe it's a wiring issue, maybe it is a circuit board issue. a wrinkle there. >> the investigations in japan and here taking different routes. all of which may add up to the dreamliner not coming back quite as soon as they'd hoped. >> someone screwed up.
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product liability. it's not so clear that the japanese company -- it's not that big. we look at the size of it. but people have insurance. and i think that boeing could be doing some collecting. >> yeah. finally, on the market, interesting article today in the journal again saying perhaps we're underestimating how much stock is being bought back. yes. that is still an underlying theme as we head further into this year, which is incredibly low cost of debt. again today, you see companies taking debt out that they took on not that long ago, with lower cost debt, or even use some money to buy back stock. certainly a theme that continues. >> herbalife is being sherwin williams, the tape is being printed against it every day. i wouldn't be surprised if the company comes in with guns blazing. guns blazing. michael johnson. he doesn't tolerate this. he's actually a tough guy. >> i would assume he is. >> and dan loeb, you said brings
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three guns to a knife fight. >> yeah. >> that's what i said this weekend, the ravens brought three guns to the knife fight. >> jim sounded off on the fed. >> he has no idea what it's like out there. none. and bill pool has no idea what it's like out there. my people have been in this game for 25 years. >> jim was absolutely right. if you saw these transcripts last week. stick around for that. also ahead, sheila bair one day after the president's inaugural address. what she has to say about the debt ceiling standoff. what a week it is going to be. "squawk on the street" is back in a minute. twins. i didn't see them coming.
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shares of research in motion are up sharply this morning, after the ceo said the ongoing review could potentially leetd to the sale of its handset business. plaque berry upgrades alone could in fact drive themes. the question in terms of if they do license their software platform, jim, who would they license to, since knockia is with microsoft, and samsung, motorola with android, so who is
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left to license with this platform? >> they talk about making white phones all over the world. it's conceivable they could do it with that. if you go to, i don't know, apple san torii, i don't know -- >> they're huge. major growth market. >> emerging market. >> looking at the margins for verizon, they certainly hope this company gets it together. if you had a viable third competitor, it might put them in a better position to say, we're not giving you everything you want, apple or samsung. >> r.i.m. has been a one-way stop. verizon was up. verizon's fine. there's too much nitpicking going on. r.i.m., when they reported, they took the stock down themselves, and ever since then it's been a staircase up. >> what does selling the hardware unit instill confidence in the 10 whatsoever?
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>> qualcomm did it. no, i don't know. it's a nice story. remember when qualcomm got out of hardware. i think that r.i.m. is -- you know, look, this generation, we've been waiting for this iteration. r.i.m.'s not dead. i think that's the issue. r.i.m. is not dead. it's a walking dead. >> even with very conservative estimates, they're estimating 29 million unit shipments for fiscal 2014. just from upgrades alone, people who have blackberries are going to upgrade. that accounts for the bulk of what their's modeling in for the fiscal year 2014. conservative, they make the case on r.i.m. shares are going to double over the past three months. few stocks you can say that about. >> indonesia should be -- remember, i started selling bric
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with two is. and blackberry, is synonymous with phones over there. when you have that kind of number, that means you can go to countries are people are presuming that you have a blackberry. when you go to europe, people assume you have a samsung. >> yes, they do. >> thank you. >> good answer. a new week means new opportunities. cramer is here to help you find the best of the bunch as "mad dash" is ahead. the ceo of the sands on the state of the gaming industry and the bets his company is making to grow the casino operator. a lot more "squawk on the street" back in a second. [ male announcer ] when you wear dentures you may not know
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about six minutes until they all get back to work after a long weekend. let's get jim's "mad dash." speaking of the inauguration, some policy ideas in there. >> jefferies, remember, the president took aim at utilities, coal-fired utilities, and i found it chilling. i found it chilling, because these companies have spent fortunes trying to meet the demands of the epa. and it isn't enough, the president just saying, no. not enough yet. he wants to stop coal in this country. he just wants to wipe it out. because he thinks it's a terrible thing. >> a lot of people said it was packed with partisanship.
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bp. >> bp, talking about valuation. now, wait a second. wait a second. you have a trial that starts in a month. and how much money has this company had to -- this company has paid out billions. but it's not over. it's not over. they're going to get hammered again. maybe after they get hammered again you can buy it. but this thing is still in the crosshairs of government trying to make the budgets. justice department zapped them. doesn't matter. they will not let this one go. >> a good cautionary note as well. >> yes. >> when we come back, we'll find out how much longer boeing's dreamliners are likely to remain grounded. and did you hear about this? phil mickelson, why is he paying 62%, 63% tax? >> i like the nike add. >> all that, plus the opening bell in just a moment.
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[ indistinct shouting ] ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪ you're watching cnbc "squawk on the street" live from the financial capital of the world. the opening bell is going to ring in a little less than 90
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seconds. a busy week. everything from apple to microsoft to bristol-myers reporting earnings. we talked about some of the highlights. also, davos happening. you never know what could come from the other side of the planet. >> a lot of hitters there. periodically getting a new story. we have maria over there, and steve liesman, i mean, it's really -- we're bringing out the big guns. we've got the bazookas there. >> yes, we do. yes, we do. >> it's big. >> it is big. a couple of years ago is when the arab springs started, we were in davos. >> that's right. >> all right. microsoft's there. bombers under fire again. he's under fire constantly. >> it's been a long time. >> let's get a look at the opening bell here in a few seconds. the s&p, as you know, an
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interesting day, a bit of a run-up here on friday afternoon. let's see how that translates into today's session. at the big board, celebrating the ipo which happens on friday. nasdaq, another ipo from friday, a global enterprise center provider. among the more interesting stories in the papers today, david, deconstruction of what led to the autonomy. interesting color. >> those are always fascinating to read. great reporting by the journal. just in terms of understanding the decision-making, or lack thereof, the directors of the ceo, the pressure he felt he was under. and what ended up being a series of, at least we can assume now, incorrect assumptions and decisions by one-half of the board, while the other half was focused on the potential plan of splitting the company. the manufacturing business, meg wittman coming in after all, decided not to do.
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>> fascinating story. at one point, as you mentioned, only half the board was focused. i mean, no, you're making a giant acquisition. how could only be half be focused. how could everyone not be involved in that. >> not to mention some of the directors were new directors. >> right. >> because the composition of the board changed dramatically when tepper came in. some of the directors he picked. what a mess. >> yeah. >> that's all you can really say. we'll see where this thing goes. we haven't checked in on autonomy in a while in terms of the investigation that is still ongoing from our s.e.c., from the office of the accounting over in the uk of fraud. we'll see where that ends up. >> the stock is up today 1.5% today. >> this is one of those bob dillon moves. in times, they are achanging. pictures of johanna?
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>> highway 61? >> 64. >> you're on the wrong highway. >> highway 64. >> 61. >> route 66. >> speaking of accounting fraud, take a look at caterpillar. it's down 1.25%. alleged fraud, the chinese firm that it acquired, causing it to write down most of the value of that firm. is this the time to go in? >> you've got the quarter coming up. i think the quarter's weak. there was a good note last week by piper saying the quarter's going to be weak anyway. look at deere. look at these stocks. caterpillar reports it's bad, people just -- they swarm all over it. >> verizon -- >> how is verizon doing? >> up 1.5%. >> they said we would be hurt in verizon. >> on the call, they did mention a number of things, including the fact they can do share
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buybacks right away if they need to, and a number of other things perhaps helping. they're paying out a lot. they've got a large dividend. that's obviously supporting the stock. given the conversations i had with a couple of people who invested in this sector, i would not expect the stock to be up, given their margin numbers. perhaps investors are already taking account of that. >> apple, shares up 1.5%. this is despite the price target cut by ubs and steve. he sounded the caution on apple. citing supply checks a long time ago, but didn't take the price target down until today. citing a story by customer intelligence showing customers are buying older iphones with less memory, which could continue to pressure margins. he's cutting 2013 eps 25%. really, reflective of what has gone on on wall street so far in the past couple of weeks, as there's sort of this steady stream of, i don't know, reality
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recognition. >> i think apple's fine. no one wants to hear it's fine. they want to put every single chip on apple or bet against apple. sometimes stocks are just fine. >> tell you what would have been good to put chips on at the beginning of the year, travelers. up more than 4%. one of the best performing dow components of the year. people never know what to say about it. even the wires can't really give you the color, because it's a difficult one to understand sometimes. >> storms are good. storms raise your premiums. have you tried to look at flood insurance, how much it's gone up? when you get your insurance bill, it is going to just shock you. okay? it's going to shock you. travelers is on the move. you always invest in the portfolio. tell us about it. you're familiar with his work. >> he's had an incredibly strong track record of posting very strong returns with that investment portfolio.
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municipal bonds and things of that nature, as you well know, perhaps even at the bottom, understanding how that market works. but yeah, at the end of the day, they take in premium and they've done a pretty darn good job of investing it. >> amazing job. freeport's up. arm's length deal. >> terrible deal. not terrible, but frowned upon by some investors. >> came in a little bit light. they posted earnings today. they had increases in the price of gold and copper. as well as -- actually, molybdenum was down 16%, which is an agent used in stainless steel and other alloy metals. i was looking for the press release this morning to look at the balance sheet off the earnings, and they had this other press release out today. it was written like a news article. extolling the virtues of the pxp mack moran deal. saying they were drilling oil and gas at record rates.
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freport diversifies its revenue. the headlines with this, with the diversification play with high risk. that was an interesting sales pitch that the company was making today. >> that's right. they have huge cash flow. gigantic cash flow. >> interesting story line for the movie rental business. dish closing how many blockbusters. and then coin star, the post said they turned down a private equity offer last summer. $60 a share. even though the trends for the kiosks, not exactly positive. >> no. >> i've got to tell you, that is one of those retail stocks, i love that. they can't get enough coin star. >> why is that? >> i don't know. >> they love the lower price stocks? you pointed that out many times. >> blockbuster was one of the greatest performers for generations. people love the accessibility of
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that kind of scoring. >> atari. >> i still have a kong. it's like -- >> oh, like vintage. >> yeah. it's really cool. >> i'll play pong all day long. >> it's a good game. >> i'm play pong all day long. i am writing that down right now. >> says david faber, january 22nd, 2013. >> that's not fear pong, it's pong. >> i know. >> do you ever play it? >> yes, i do. >> help us out, melissa. >> why don't we check in with courtney reagan, in for bob pa san. >> we're in the first seven minutes of trading. we did finish off three weeks of gains, sitting at five-year highs, we'll see if we can
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extend that. we're about 14.5 points away from hitting 1,500. if we cross that mark, it will be the first time since december of 2007. also watching yields on the ten-year. still shy of 2%. again creeping ever closer. that's a level that bob pisani has been watching closely. our friends on "squawk on the street" are finding interesting in the transport group. the first is kansas city 7. this is a regional railroad beating on both the top and bottom lines. delta also beating on the top and the bottom lines. kansas city opening at historic highs today. lifting the transports again to historic high. they have hit the historic highs five days in a row. we could make it a sixth day in a row. the airlines have been a strength in the transports. in fact, airlines have been a huge driver for quite a while. since november 16th low, transports are up 18%. airlines, though, up 28%.
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and transports have been outperforming the industrials since the middle of december. so it's a group that we like to watch here. it's an interesting bellwether as we move through the earnings season. we look for some of these nuances in between the numbers. jim, back over to you. >> let's check out the latest in metals. >> jim, all eyes on asia, and looking at the bank of japan and policy shift there. plans for more stimulus helping commodities across the board. overall commodity index at a three-month high. we're looking at a three-week high, one-week high, rather, for brent crude and copper prices as well. as we look at what's happening in asia, we're also watching what's happening in china. positive economic data there helped to lift many commodities. wti crude futures among them. looking at the march contract right now, february will go off the board today. that's where we're looking at perhaps a move to $100 a barrel. capital is looking at as we
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cross key technical levels there for the wti contract. the big mover, though, has been natural gas over the last several sessions. and today natural gas topped 364 -- $3.64, as we have extremely cold temperatures here for the better part of the week across most of the northeast. that is supporting natural gas. off of the highs, but still at the highs of the year for nat gas. back to you guys. >> thanks very much, sharon epperson. did want to talk about japan. something we haven't really hit on this morning that much. of course, there's been a lot of talk lately, as you know, about a 2% inflation target, the new leader of the country talking about massive injections essentially of liquidity, if you will. but a lot of that not going to take place as soon as people had anticipated. 2014 now is seen as when they will really start that program. and, well, the end bouncing up a bit here, as you would expect.
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our viewers may know carl bass, hedge fund manager, hayman capit capital. bet correctly on the mortgage meltdown a number of years ago. and had a very strong year last year. one of his bigger trades, though not a huge allocation of capital, has been in anticipation, and a thesis that at the end of the day, japan is not going to be able to exit what he called the zone of insolvency. i'll let mr. bass explain. >> if you study this situation deeply, you'll see that japanese debt is about 24 times central government tax revenue. when you sail into that insolvency, nothing can help, in my opinion. they would have imploded under their own weight down the road. now they're targeting 2% inflation, they don't realize it will force them to explode much sooner. >> again, those open-ended asset
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purchases will not take place, at least under this essentially quantitative easing program they have, until the start of 2014. not quite -- why do you wait a year like that? >> to be that aggressive, more aggressive than ever and say you're not going to -- >> that caught everybody by surprise. everybody was expecting something to happen immediately. therefore, the risk was to the upside on the end. >> we will keep an eye on that. of course, what continues to be a lot of friction between those two key trading partners in asia, china and japan, with the rise of nationalism in both countries. the fight over these islands in the south china seas. >> i think that's going to be the story for the next ten years. germany and japan, do they rearm? i'm not saying in terms of the axis again. but look, we're pulling back. these countries are going to defend themselves. i didn't hear a lot about in
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that inauguration speech about the idea that we're going to do anything other than pull back. >> good point there. all right. they know nothing. turns out he was right. famous rants in what the fed missed, that's next. early movers on this tuesday on wall street. [ male announcer ] you are a business pro.
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♪ whatever your business challenge, dell has the technology and services to help you solve it. almost five and a half years ago it was the rapt heard round the world, cramer calling out the fed for not understanding the magnitude of the crisis that resulted in financial market turmoil. >> i have talked to the heads at almost every one of these firms in the last 72 hours and he has no idea what it's like out there. none. bill pool has no idea what it's like out there. my people have been in this game for 25 years, and they're losing their jobs, and these firms are going to go out of business and he's nuts. they're nuts! they know nothing!
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>> cramer -- >> i have not seen it since i went five bid for half a million shares of citigroup and i got hit in 1990. this is a different kind of market. the fed is asleep. >> a lot more evidence cramer was right, as shown in the minutes of the meeting that took place days after that tape. william pool, said my own bet is the financial market upset is not going to change fundamentally what is going on in the real economy. atlanta fed president dennis lockhardt talked about cramer's rant and said, i believe that the correct policy posture is to let the markets work through the changes in risk appetite and pricing that are under way, but the market observations of one of my more strident counterparts -- and that is not jim cramer -- are worth sharing. jim, do you remember that day well? >> the market was down that day. you can't come out all the time and -- i don't know who their sources were, really. because they go on and on.
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that everything was going to be fine. the sources, you know, my trusted friends, colleagues have been in business a l time. they just weren't saying the same thing as the fed. it didn't actually -- it wasn't like i had a particular insight. there were a lot of people who thought this way. >> i was as well at that point, 2007, i remember your rant well because i said -- you know, i used to sit up in the back stairs, i thought, what in god's name is going on. i actually came down. i had no idea what that incredible sound was that i was hearing. >> i didn't start out to be that way. we were just talking about -- >> what's frightening is, that you're encountering every day, as i was, in terms of talking to guys trying to put together a leverage buyout. people in the credit markets, over and over again were saying, david, this is much, much worse than people understand. >> yeah. >> things are seizing up. yet i would have been of the belief, of course, they know
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that. they've got to know that. these are the guys on the open market. how could they not. >> if i'm somebody at home and i take a look at all of this, it makes me less confident in the fed in general. do they know what they're talking about today? do you think it's different now, jim? >> i think bernanke totally changed his tune. he began to realize the rates were way too high. unemployment 5.5%. they really got it wrong. you had people like pool still respected, still quoted all the time. basically saying, listen, this is just -- >> the credit marks were intinsicily connected to the bubble that we had. maybe they hadn't recognized that, and how there could be a wave. i'm fought funot fully understa those connections. >> the people i was talking about are people who started with me in the early '80s. and they were begging me to come out and say something. they knew that the fed really wasn't on its game. the fed was just -- so many
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people in that room, the only thing they really did is have a chuckle at my ranting. >> there were a few different transcripts that came out on friday, to poole's credit, he was one of the first to ask for a discount rate cut, let's start moving in that direction. at one point he asks dudley of new york whether or not there's something else regarding banks that we're not seeing in the media or papers. that's where dudley tended to come up short. >> a leverage ratio, they might want to look at that. >> i think their sources were -- maybe people don't want to tell the truth because they're afraid of getting regulated. someone will come in and say, listen, if you say you have problems, i want to look at your bank. >> but you can't sit there in an ivory tower. you've got to have sources. at the end of the day you can call up and say, what's really going on. it can't just be tim geithner. they have to be people in the market. >> it's remarkable how complacent they were. really remarkable. >> the piece of tape that will go down in history, i'll tell you that, jim. >> i wasn't ever taking it back.
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but i tried to soften it later on and came back on air, i didn't want to be part of the story. i just wanted them to wake up. i clearly woke them up and they thought it was really funny. and he who laughs last, laughs last. congressman leven about ending the standoff. but first -- launching into a market like this can be tough. but we have someone here who can help minimize the damage. jim cramer and 6 stocks in 60 seconds. he may just give you the lift you're looking for when "squawk on the street" returns.
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simon hobbs in los angeles at the largest hotel investment conference in the world. hey, simon. >> hey. very good morning to you, carl. dawn just breaking here in l.a. in the next hour, "squawk on the street," we'll break open what has black stone done with the hilton group since they took it
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private five, six years ago. we're also going to talk to an icon of the hotel industry, michael leven, currently ceo of las vegas sands. that's in the next hour of "squawk on the street." back to you. >> simon, thanks a lot. let's get "six in sixty," six stocks in 60 seconds. deutsche throwing in the towel. >> everybody's surprised that the equipment company is doing as well as they are. >> ubs. >> don't panic on the boeing. they're still going to build a lot of planes. that company is uniquely connected to the aerospace industry. people expect any minute a takeover. >> rbc, mohawk holding a buy. >> this is flooring. any part of a house goes higher. >> allegheny tech. >> this is a very difficult
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story. because it's stainless steel, used to be a major space. this stock is just going nowhere. >> finally, speaking of football, oppenheimer said stay with domino. >> look at this stock. this is one of the greatest performers of all-time. it's not stopping. patty doyle, what a remarkable story. >> new recipe obviously working for somebody. what's coming up tonight? >> we've got a takeover stock. you've got to stay tuned for that. also, i have a very controversial chart that i'm going over. you've got to stay tuned on that one, too. >> you've been studying hard today. even people on twitter say you're quiet. >> this is when i can really screw up. you've got the lightning round, verizon. the margins aren't that bad. i've got to stay so focused during this period. it is difficult. it is difficult to try to figure out whether it's going to be the ravens or the niners. i don't have time. >> we're going to get your pick on friday, i'll tell you that.
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>> absolutely. >> have a good night. see you tonight, 6:00 and 11:00. tracking the state of the housing recovery. we'll get breaking news on existing homes and market reaction. also getting ahead of the curve on google. how do you play the internet giant. [ engine revving ] ♪ [ male announcer ] every car we build must make adrenaline pump and pulses quicken. ♪ to help you not just to stay alive... but feel alive. the new c class is no exception. it's a mercedes-benz through and through. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services.
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welcome back to "squawk on the street." i'm diana olick with breaking news from the national association of realtors. existing home sales fell 1% to a seasonally adjusted annual rate of 9.4 million units in december. that is a big miss. the street was expecting a 5% gain. we also have a downward revised november figure to 4.99 million units. still up 12.8% year over year. for the full year, 2012, sales increased 9% from 2011. going regionally in the northeast, sales increased 3.2%. realtors say that is sandy's recovery, sales being pulled forward. midwest fell 5.9%. that's month-to-month. south down 3%. in the west, a nice gain of 5%.
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median existing home price, $180,800. again, median, the mix of home selling, for example, sales of homes over $1 million jumped 62% year over year. sales of homes under $100,000 down 17%. that's why you're seeing that shift in the median home price. inventories are the big story, though. 1.8 million homes for sale. that is down 8.5% from november. and down 22% year over year to a 4.4 month supply. we haven't seen supplies of home for sale this low since may of 2005, at the height of the bubble years. we haven't seen that few homes for sale since january of 2001. the realtors are warning, if we don't see supplies increase come spring, and we still see this sales pace, prices are going to increase just too fast. i know you're saying it's good to have price increases, but if prices increase faster than
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incomes, you'll start to see the multiple bidding wars and affordability, again, go the wrong direction. again, a disappoint on home sales in december. back to you guys. >> thank you very much, diana olick on that miss on existing home sales. not too much of a reaction. we should note the lowest level since 2007. record highs in the mid kanscaps well as the russell. >> philly and empire are misses as well. we'll begin with the parade of dow components reporting earnings this morning. verizon, 12 cents miss dragged down by superstorm sandy. a full year forecast below estimates. we'll tell you how to play them next. the gaming industry, and the bets being made overseas. and the second largest radio station operator in the company
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on the future of traditional radio. first more worries for boeing. the dreamliner likely to be on the ground longer than anticipated. >> that's weighing on shares of boeing. the idea that perhaps the grounding of the 787 dreamliner may be something that stretches into later this week, if not longer. when you take a look of shares at boeing, there's the prush ur down another $1. holding in the $74 range. first of all, when you look at the investigation in japan, investigators there looking at the charred battery from a 787. they now say that battery received too much voltage. it was essentially overcharged. the investigators are talking to the battery maker again today. that stock has been under a lot of pressure since the first incident was reported on january 2nd. meanwhile, here in the united states, the ntsb continues to
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look at the japan airline 787 battery, but in reverse of what we're seeing in japan, they say this battery was not overcharged. the investigators are in arizona today visiting the battery charger manufacturer. that is a company called secure a plane. it's a subsidiary of mega plc out of the uk. over the last couple of days, that's seen a little bit of pressure as well. what we're seeing is an investigation where they haven't been able to square up what happened in japan with what happened in boston, so as a result, they're going to start diving further into the components that go into the dreamliner, and are connected and work with the battery to see if they can find out exactly what went wrong. and then from there, they might have a better sense of how to correct the situation. guys, back to you. >> now, phil, because these two regulatory agencies on opposite sides of the ocean are seeing different things in their investigation. does that tell you that the investigation may be much longer than anticipated? >> well, yeah, it would be different if over the weekend
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they came out and said, listen, the exact same thing happened in both instances and that has led us to believe it was a piece of software, or a particular part, or it was definitely this part of the battery. because they haven't reached that conclusion yet, they're going to have to dive further into exactly what the different components that worked with the apu, what they have done, did they work as designed. there's a lot of testing that's going on and a lot of looking at the flight data recorders from both planes. it's going to take a while to piece this together. >> phil, thank you. phil lebeau. let's get back to the components board here. craig is an analyst, he has an underperform on verizon. craig, always great to speak with you. >> great to be back. >> on the wireless margins, came in at 41% or so. on the call the cfo said for 2013, we see margins coming in at 49%, 50%.
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i look at that and think, maybe those iphone activations are not really good for the company at the end of the day. >> that's a double-edged sword, that's exactly right. they certainly bring future growth. the challenge is that they bring a lot of near term costs. i think the bigger issue for verizon going forward, though, is it's not the house, it's the neighborhood. the challenge for verizon is, they're growing their subscriber base by just about 6% in post paid. the industry is growing at a little less than 1. the real challenge is, how verizon can continue to grow so much faster than the industry without eliciting some kind of competitive reaction. >> right. and do you think that its -- it seemed like it was making market share in the fourth quarter against at&t. is that where some of that growth is coming from? >> sprint and t-mobil have been losing subscribers for a while now. i expect at some point during 2013, you'll see at&t fall into that same category. this is a high fixed cost
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industry. the challenge is when one player is growing and everyone else is losing, that becomes a very precarious equilibrium. >> do you think that's why the cfo on the call also said that they could be buying back shares immediately if the price is right, that maybe organic growth is not there longer term and what they have to do is go in the market and reduce the shares outstanding? >> that could be part of it. these companies are in a unique position, though, in that they consider their dividends much like a lot of income investors consider their dividends, almost as a bond surrogate. to some extent, the buyback dividend yields at 5%-plus for a cost of debt right now that is substantially below that. so they think of it as retiring a cash obligation. that's a very unusual way to think about equities. but that's been the way at&t and now verizon i think are thinking about share repurchases. >> in terms of your rating, craig, what's the primary reason why you have it at underperform?
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is it the run-up in the stock we've seen? >> at the end of the day, verizon actually ended up underperforming a little bit in 2012. but look, this is still a very expensive stock. it's trading at 19 times trailing earnings. if you actually include all of the one-time charges, and they have a history of one-time charges every year, it's trading at 137 times gap earnings. this is an awfully expensive stock for a company that is growing at only around gdp growth rate, in an industry that faces very, very real structural challenges. there isn't subscriber growth in the wireless industry right now. the growth is only coming from the one-time transition from feature phones to smartphones. capital spending is rising for everybody. it's a real challenge for verizon to continue to outperform at that high valuation given the challenges that the industry is facing. >> at&t has a higher valuation
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than verizon. i'm curious what the read-through is. >> at&t doesn't have a higher valuation than verizon if you calculate verizon properly. verizon only owns 55% of the wireless. >> oh, right. >> on a proportionally consolidated basis, at&t is significantly less expensive than verizon. >> what is the read-through from verizon then? >> verizon did very, very well with net subscriber growth. the challenge for at&t is all they pre-reported is the number of smartphones they sold. that doesn't necessarily translate into growth. a lot of that could be upgrades. the challenge for at&t is can you continue to grow with verizon taking this much share. and if they can't, the question becomes then, okay, so what do they do about it. and if at&t responds competitively, then that has implications for the whole industry. >> craig, great to speak with you. thanks for your time. >> nice to be back. on to another dow component. johnson & johnson this morning,
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we bring in katherine arnold. good to have you. >> thanks, carl. >> a lot of discussion about the, quote, low quality of the beat. do you agree? >> yeah, it really came down not operating expenses and tax. they probably would have had a slight miss from our numbers if the two items weren't coming to bear. >> then there's the guidance. you make your point this morning that they have a history of doing this. it would give gorsky wiggle room here. is this necessary? >> well, you know, they obviously -- that's their culture. new management. i made that point, it's always better to underpromise and overdeliver. in the last few years, if you look where they came in versus consensus, was below. they beat that. some years they didn't. it's a mixed bag on where they'll come relative to where they're at now. this is what they've done the
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last three years, even before gorsky took over. >> are we seeing the echo, katherine, of some of the manufacturing quality control issues? was there any of that ringing in this quarter? >> you know, they're actually almost on the other side of that on consumers. i think they're still dealing with some of the side effects of having product not available in that division. and they need to sort of claw their way back in terms of that. on the other hand, in terms of medical device side, we're seeing the benefit of the acquisition. that should be helping them. >> did md & d come in above or below your expectations? >> it actually looked healthier than we expected. although we were looking for growth there. >> the cfos on the call just finished speaking on the call, talking about this medical device excise tax, part of the health care legislation that will take about a 25 cents a share out of the year. how worrisome is that? is that a big hangover on the stock? >> no, it's been flagged for
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multiple years. i think that's pretty well dimensioned. it's for a company at the scale of j & j. what's most interesting about what just recently came out is the comments about the clinical laboratory business, and the possibility for them looking at that business as a divestiture. i think investors are looking for j & j to continue to evaluate their mix and make sure the profitability profile in the longer term is improved by having the right mix. >> so we are finally above 70 at least. it's been a long battle to get there. the question is, can it stay there. your price target 70. what's it going to take to get you off the neutral? >> i'm focused on longer term growth. evidence of even the near term growth, guidance implies 6% earnings growth in 2013. we thought that would be 9%. i think that's part of the disappointment. i think you need to see longer term earnings drivers, augmentation of pipeline. i would like to see more
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aggressive share repurchase. it's really hard to make great products even drop to the bottom line. there are changes that could be made. the pruning exercises. bolting on higher growth businesses. it's really a combination. there's not a silver bullet to the augmentation of growth. but i think there are things the company could do. >> finally, cramer said in the last hour that gorsky, in his words, is not beholding to the ghost of weldon. i wonder if you think he has any tricks up his sleeve, or if he's as much a breath of fresh air as people thought when he was first named? >> i think anyone in that position would certainly want to have their stamp on the business, their legacy created. i'm sure he wants to make sure that that's his. he's a very disciplined guy, a very thoughtful guy, a very strategic guy. i think you'll see him take a careful look at the mix of businesses. he's sort of already hinted at that, even on the vascular side. we saw the exodus of stints from
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the past. his finger's on that. i think that's a real opportunity for him. and now 67 billion as a revenue base, you have to think about mix. >> katherine, thanks so much. we'll talk to you next time. >> thank you. >> let's get to mary thompson on this tuesday morning. >> hey there, carl. we're taking a look at shares of travelers. the dow component stock up off the highs of the day, still a nice 3% gain there. the reason the company's operating earnings handily beating estimates at 72 cents a share. on the conference call, they said the company is confident going into 2013, despite a challenging operating environment that continues to focus on the low rates that they are dealing with, and also weather related catastrophes. additionally, autos a weakness, but the company is confident the higher rates will eventually be offset by a lower accident impact from that business.
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we're watching that again. travelers up over 3% on the very, very strong earnings. >> thank you, mary thompson. insurance helping the financials. coming up next, a member of hilton world's top brass joins us live. the chances for an ipo. former fdic chair sheila bair the day after the president's inaugural address. what's her take on the president's argument about the debt ceiling. [ male announcer ] don't just reject convention. drown it out. introducing the all-new 2013 lexus ls f sport. an entirely new pursuit.
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good morning from l.a. one of the biggest events that investors have to look forward to over the next year is the prospect that hilton could be returned to the u.s. stock market. now, remember, blackstone took it private at the height of the market. $26 billion, a whopping $26 billion in 2007. the question that investors and the rest of the industry want to know is, in that private environment, what has private equity done with hilton. for the first time we'll start pricing apart hilton for the sake of investors and the rest of the industry. joining me here is the president for development at hilton. welcome to the program. >> good morning, simon. >> what have you done in particular, what has the international expansion been for hilton whilst under blackstone? >> in the last five years we're focused on growth. we've added in the last four or five years, where we've had these terrible economic conditions, we've added 1,000
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hotels. >> 1,000 hotels. >> that's just shy of 4,000 hotels now globally. we're in 90 countries, versus 77 five years ago. we have also our largest pipeline in the history of our company. 1,000 hotels approximately, 170,000 rooms around the world. probably most importantly, five years ago, only 15% of that pipeline was here in the u.s. as we sit here today, 60% is outside of the u.s. and we now have something approaching, you know, 80% of that under construction. which is a very important metric for us. those hotels will open in the next one to three years. >> you're not going to talk to me about the ipo, but in my head i can hear the pitch in the prospective. you will pitch yourself as the fastest growing hotel chain, is that the deal? >> yes. i think that's exactly -- >> internationally. >> internationally, that's absolutely been our focus. our key objectives when we took
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the company private, is expand the footprint. we have fabulous brands in the u.s. we chose to take it internationally first. very, very suck ssful here. >> you bought the international and domestic together. >> exactly. >> but are you doing it at the right time? you've put your foot on the accelerator through difficult economic times. i read here, for example, one out of five hotel rooms under construction in europe are yours. this is a cyclical business. are you doing it at the right time? are you expanding too much? >> no, this is absolutely controlled. the way we set up five years ago, in fact, to focus on the number of the brands, and targeting key markets. just four years ago, we only had four hotels in china. as we exit this year, we'll have closer to 50. open in trading. if we did nothing more within the next two to three years, we'll have over 100 hotels.
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>> is that too many? >> i don't think it is. if you look at the metrics for china, even if there's a little bit of a slowdown right now, the long-term picture for china is fabulous. inbound we think is very important, but also for outbound. brand recognition, brand loyalty, membership to the program is important. >> we're trying to work out exactly when you're going to ipo. i called blackstone and they won't tell me. you are a big chunk of blackstone. presumably you'll want to do it when the hotel industry in the united states is on an upturn. this is the fourth year of the upturn. therefore, we say you're going to have to come to the market this year or next year. and some are saying that maybe the cycle will be longer this time around. because there isn't that supply coming on onscreen. because we absolutely stopped building hotels in the united states in 2008. >> you're absolutely right. >> my question for you, is the
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cycle longer, is the window for you to ipo longer? >> i went on to the last one, but the first one, the cycle is probably longer. we went deeper in the cycle than any of us have ever known. you have to play catch-up. the supply and demand balance is there right now. it would continue for another few years. so the overall metrics are very positive. we ally saw an upturn for new product, applications for new development in the back half of 2012. that momentum is continuing to 2013. we see that continuing beyond that, especially the focus. >> you are a big kid on the block. how are you going to behave once you become a public company? are you going to change the status quo? for example, hyatt and everyone else don't own their own hotels. you've got 70 properties. the way you've been running things in the future, they may not be where the industry is headed. will you make changes in that
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way? >> traditionally in the past we've followed asset-like approach. which we still like. we vice president bought or built any new hotels ourselves during the period we've been private. that feels right for us right now. the hotels we own are very big conference gateway city hotels. which we own. we'll assess that as we move forward. >> in the meantime, do you regret that you had to move to d.c.? the l.a. offices were -- i mean, it's a different type of hilton. no paris hilton connected to the group anymore. >> there's lots of pluses to being in virginia, but also pluses to being here in l.a. as well. >> i hope we see you more on the network. melissa, back to you. more from the largest hotel investment conference. >> thank you, simon. still ahead, taxing times for phil mickelson. why he's warning he might need to make drastic changes, even hinting at retirement. ♪
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golf icon phil mickelson saying he's thinking about either quitting golf or leaving
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his home in california on concerns over his state's federal and tax increases. robert fraempg joins us with more. more money, more problems, apparently. >> it's tough to be phil. phil mickelson said if you add up all the taxes he pays, federal, state, unemployment, social security, he pays a rate of 62% to 63%. i talked to a lot of accountants this morning who said that number is a little too high to believe. let's go over the numbers. federal income tax rate, new rate 39.6%. california income tax, proposition 30, just raised it to 13.3%. that gets you to 52.9% with those two numbers alone. medicare/medica medicare/medicaid, another 2%. health care, 9%. self-employment taxes, 15.3%, but only on income over $113,000. so it's really 2.9% for him there. local taxes where he wins his tournaments, maybe another 1% to
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be con receiver tiff. what does all that add up to? basically it's around 59% to 60%. and that is without any basic planning. even if phil used turbo tax, he could get that number way down. let's take a look. if he deducted his california state taxes from federal, that's pretty standard. he reduces it. he could deduct his golf expenses. those i guess would be substantial. basic retirement planning, 401(k), i.r.a., probably does that. if he earns any income from investments, those, of course, are taxed at 20% to 20.8%. if he has a mortgage, if he deducts his child care expenses, et cetera. so very basic tax planning, where does that get us? well, it's really around 50% to 52%. either phil doesn't really know what he's really paying, or he needs a new accountant. guys? >> still, 50% to 52% is a lot.
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i would imagine california has one of the highest tax rates in general. compared to the rest of the country. >> it is the highest. i don't mean to make fun or diminish that his tax rate in the last three months has gone up 8 percentage points. i don't want to diminish that. i spoke to an accountant this morning saying he's heard from a lot of athletes that look into the idea of quitting, or more often moving. but then when you talk to the kids, and you say, kids, we're pulling you out of school so i can save you a few dollars on taxes, it's not going over very well. the incentives are there, but we're not seeing many athletes really move, because the taxes are not high enough to make that much of a difference. >> we do have an audience on the west coast that's waking up about now. phil is certainly speaking to those sentiments. no matter what the number is. >> no question. we're seeing him and others probably give less to charity as a result of this. and we may poke fun at it, but
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there are a lot of wealthy people, athletes and nonathletes alike, in california saying this very issue. >> good story. thanks, robert. see you later. a review of the presidential inauguration this weekend. what it means for the markets as we hover near five-year highs. shares of r.i.m. continuing higher on another dose of optimism for the blackberry 10. google out tonight. how do you play the tech sector. [ engine revving ]
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shares of r.i.m. continue to climb higher ahead of the much anticipated blackberry 10 launch. it's up more than 100% in the last three months, up 10.5% today. google and apple earnings out this week. kevin is the chief investment officer for firsthand funds. kevin, great to speak with you. >> thanks. good to be back. >> i want to first talk about r.i.m., and these reports. the ceo saying essentially that he might be looking to sell the hardware division, or license the blackberry 10 platform. that raises the question of, well, if they go ahead and license, who would they license it to? i'm wondering if you think that
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could be a viable strategy for research in motion? >> you know, you're asking just the right question, because i think most people have sort of made their bets. the android platform has so much momentum. it's hard to imagine someone deciding, oh, i'm going to make a switch, i'm going to get off the android platform. that seems kind of odd. if you're going to make a switch, why not switch to the android platform if you're not already on it. i don't see that. but stranger things have happened, i suppose. >> in terms of the move that we've seen in research in motion, not just today, up 10.5%, but over the past three months, do you think it is in fact the anticipation that the blackberry 10 will somehow ignite sales and be the savior for research in motion? is there that much optimism surrounding that? do you believe in that optimism? >> well, that's just one product. the stock looks like it's up in anticipation of something. and whatever you think that something is, whether it's a licensing deal or just a great product launch, i think the
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market has just shown you how far the stock can go down if you're somehow disappointed. we don't have a position in that stock. we're not rushing into it either. >> let's look ahead to google. that is out after the bell tonight. in the past few quarters, google has disappointed, at least the stock reaction has indicated that the company disappointed on each of those quarters. >> right. you know, the underlying cash cow is pretty healthy there. the selling ads on paid search, great. just keeps on chugging. they're still trying to digest this, i don't know, this water buffalo they swallowed in motorola. hard to know how much of a hit they're going to take there. but the core of google is healthy and profitable. you know, i don't see a radical miss coming. >> okay. and in terms of facebook, i've got to ask you about that, because in the days after the ipo, we had you on many times and you were a staunch defender.
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still hasn't recouped that level, although it's up on an upward trajectory. the $38 mark, maybe the $45 mark high on the interday in the next few months? >> first of all, the magic number is $31.50. that's my magic number. >> okay. >> that should be the world's magic number as far as we're concerned. the company continues to do the right thing. and they're making moves in the right direction. they're on track. and every 90 days we get a little better news. and it's a great story of them sort of growing into that expectation. i don't know how fast they'll get back there. and i think traders can tell you there's probably tons of resistance in the mid to high 30s where people try to get out and get even. but you know, time helps the facebook story. and we're pretty happy holding
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our shares. >> i'm wondering, kevin, if at any point in this joy, this facebook journey you have sold shares and entered at a lower price. if you're saying $31.50 is your magic number, is that your cost basis based on all the times you've gone into that trade? >> that was all pre ipo. we haven't sold any since the ipo. >> have you bought since the ipo? >> you know, we bought a little bit in a different fund, an open market fund. but no, we're not trading around that position. >> okay. kevin, great to speak with you. thanks for your time. >> thank you. >> kevin landis. speaking of technology, google co-founder, did you see this, spotted riding the subway over the weekend in new york. i think it was the downtown 3 train. sporting a pair of google glasses. the tech company's augmented reality eyewear, discussion about what you can see on the subway, since not every station or line has service.
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but it does bring us to this morning's squawk on the tweet. what did sergei see that the rest of us could not. tweet us at squawk street. we'll get some of your responses later on this morning. ted crunch said he looks like an international jewel thief. >> he does. he looks like the kind of guy that sits down on the subway and you walk to the other car. >> kind of has the sasha baron cohen thing going. we'd love to hear from you. mary thompson has more for us. >> shares of western digital, top performer in the s&p 500 right now. just up over 4%. it reports earnings tomorrow. today getting a bit of a lift from an addition to the portfolio of storage products for small and medium size businesses. again, this is coming off a nice run for a lot of these storage companies, since november. some optimism on earnings as well. the rival sea gate technology reporting strong sales. a positive forecast when it reported earlier this month.
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back to you guys. >> thanks a lot, mary. the when we come back, the coo of las vegas sands on the state of gaming and the bets his company is making overseas. we're back in a minute.
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good morning. welcome back to los angeles to the world's largest hotel investment conference. the highlight of which will be the presentation of a lifetime achievement award to an icon of the industry, michael leven joins us, currently the president and ceo of las vegas sands, 50 years in the business. you were in college more than 50 years ago. >> i was running for mayor, and here you're opening the show with the song that i sang in that show, that's really funny.
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>> you being at this conference for the huge work you've done. you were a franchise pioneer, days inn america, holiday inn worldwide. obviously you do a lot of work in china. is it ultimately one of your great realizations that management and leadership is about the human condition, and it doesn't matter where you are in the world, we're basically all the same? which in a sense is obvious, but you've come full circle on it. >> i think it's absolutely obvious. most people think when you work internationally and around the world it's different. it isn't different. people's values tend to be the same, though their styles may be different. i think you need to really emphasize the fact when you're going from place to place, this you're not a superior culture to anybody else's culture, because those values are very similar. you learn that as you go along. and i think from my own thing, i'm successful more often than most dealing internationally,
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because i understand those people. and understanding those people, either domestically or internationally -- >> your time is consumed clearly for las vegas sands. 85% of the revenue coming from asia. is it possible they could outperform expectations with the transport links coming through now, and the stabilization in the chinese economy? or is it still quite troubled? >> i don't think ma cou is troubled at all. if you look at what's happening in china, which is the major market, 90% of the business comes from china, taiwan and hong kong. it will continue to grow, because as income grows in the mainland, it's going to continue to feed people into macau. there's no risk that they won't have considerable growth. ehave a $39 billion gaming market now that's over six times las vegas. and we think it can grow to 100. >> wow. morning star suggested actually that singapore was a better
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market for you. because there are only two licenses there and you have one. and the tax rates are so much lower in singapore. do they have a point? >> they have a little bit of a point, except there is somewhat limited growth by capacity. in other words, we only have two product of ours, and one of genting in singapore. however, you can't fit more people into the room at the same time. in other words, there's not enough capacity to grow the market significantly. the market will grow. but nothing like macau. >> did you see the note that wells fargo had out on you last week. >> i did. >> they're calling the shares up to $60, $70, 30% upside. one of the reasons they say that is because they believe you have cash to shareholders with the raising of the dividend. they're talking about $37 billion over ten years. are they right? is it a sea change with you and your boss? >> i think sheldon addelson has proved what he can do in macau
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and singapore. basically, developments cost a lot of money. it takes four or five years to build them. in the meantime, we generate an enormous amount of free cash. i think you'll see that more going forward. >> there's reports that people are looking at the sale of $1 billion. can you comment on that? >> i think we are investigating the possible sale of bethlehem. if we get our price -- we think it may not fit in the long run for our company. it's a smaller product. we'll probably look to sell it. however, somebody's got to pay the price. we're just as happy to keep it. we're taking a look at the market at this point. >> $1 billion i hear. you put $800 million into it. >> we have $800 million into bethlehem. it generates about 115 to $125 million on an annual basis. it's more likely that property would do better, even with a regional operator, like some that exist in the business.
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or someone who wants to be in that business. as i say, we have a great relationship with the city of bethlehem. the people have done a spectacular job in that place. in the long run, i don't think it will necessarily fit our product model. >> congratulations on your award, sir. >> tery much, simon. >> michael leven from las vegas sands. the news on bethlehem is real news. >> great stuff, simon. thank you so much for that. president and ceo of cumulus media talks the state of the traditional media business in a world full of itunes. we're back in a couple of minutes. [ male announcer ] some day, your life will flash before your eyes. make it worth watching. introducing the 2013 lexus ls. an entirely new pursuit.
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of course, the former ceo of sirius has been a seller over the years in part, because the new technology is making it disadvantageous to be in the traditional media business. >> as there becomes more and more of the choices t advertisers have a field day, and they have the advantage over the media companies because they could sit there and say, okay, i'll buy it in mobile if i can't buy it in broadcast network. >> our next guest well versed in
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dealing with the various challenges for the advertising marketplace. lew dickey is president and ceo of cumulus media. the second largest in the united states. cumulus making a big bet on country music. gaining even more mainstream popularity. reintroducing it to the new york city market and rolling out, lew, a fairly widespread kind of branding initiative around country music. i guess let's start there with the news today. why country? new york city, come on. >> you wouldn't believe it, but new york is the number one market in the country for country music sales. 20% larger than nashville. >> you're right, i wouldn't believe it although we have a lot more people than nashville. a lot more is going on than just that. >> this is the flagship for a multimedia entertainment brand under the name of nash that we're launching now with this radio station today. so it will go radio, it will go online. it will go event. publishing and then ultimately a video. >> you know, it's funny.
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so did mr. carmson's comments, you can't just is simply say we're put your ads on the radio, can you? >> that's a good point. today what advertisers are looking for are integrated marketing solutions. what we learned from the merger of citadel is that scale is incredibly important to be able to serve the needs of the advertisers. so hence this is sort of the method behind the madness of creating the large, multimedia entertainment brands like a nash to be able to serve the country lifestyle segment which by the way is over 80 million americans. >> what does that even mean, the country lifestyle segment? who are these people and what does it mean to say lifestyle? >> it's fans of country music so it's multigenerational. people don't understand that it's the second highest teen format an goes all the way up to 35 to 64-year-olds. so it's truly a multigenerational format that's captured by the format of music
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around this lifestyle. so think how mainstream it's gone today. you have keith urban on -- keith urban on "american idol." you have mablake shelton on "th voice." you have faith hill as the opener for the nfl. i saw taylor swift on the covers of the magazines. it's gone mainstream. >> radio, internet, obviously online. you control those. now you also mentioned video. i don't know that you guys have a video offering that i'm familiar with at least on a cable channel near me. >> no, we don't as of yet. but we're in discussions. it's a logical extension for it to have a video home. >> do you have the ability to invest in the businesses? cumulus, citadel, you took on a lot of debt. $2.6 million in long-term debt. can you invest in the business given you have a lot of debt
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load? >> yeah, we're paying down debt pretty quickly and we have a great long-term capital structure. we have the ability to invest in content and in marketing. and to grow these brands. we think this is the future. we have an obligation to invest in the future of the country and we think this is where the puck is going in terms of what the advertisers want. >> got to be like wayne gretzky, go where the puck is. what are you seeing and hearing from those who would advertise on your platforms at this point? >> well, auto and housing are starting to come back. those are very important for us in advertising. then with housing is financial services. so auto, housing, telecommunications are all actually performing pretty well. retail and restaurants, you know, are a little bit slower to come out of this. they're very levered to discretionary income and consumer spend. it's been somewhat tepid. but in terms of auto and housing, a rebound, where obviously they were very depressed an it caused a reset in the ad markets. now telecommunications is coming
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on strong as well. >> what to those who would say you're in a dying business? you're sending out a terrestrial signal to someone sitting in their car for 30 minutes. >> well, radio is free and local and digital and if we said we had the technology to have free, local, mobile and digital we can raise a lot of money around that. yet it's already here. i think it gets overlooked because it has been around for so long but it is truly the last great reach medium in the united states. for that reason, it's going to do very well for a long time. >> thank you for stopping by. good luck with the country. who knew? still ahead a review of the president's inauguration and what it means for the markets as we hover near five-year highs. ♪ ♪ [ male announcer ] something powerful is coming. ♪
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and get 6 months commission-free trades. tdd#: 1-800-345-2550 call 1-877-994-7694 tdd#: 1-800-345-2550 and a trading specialist tdd#: 1-800-345-2550 will help you get started today. welcome back to "squawk on the street." i'm john harwood. here in washington and around the country, we saw a different barack obama in yesterday's inaugural address. up with more assertive, determined to force his policy choices through the governmental system. he tried to prepare the ground for the coming fight over deficits and debt by refuting republican arguments and casting his own as consistent with the american tradition. >> the commitments we make to
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each other through medicare and medicaid and social security, these things do not zap our nation, they strengthen us. they do not make us a nation of takers. they free us to take the risks that make this country great. >> now, the president got hopeful news a few days ago when republicans blinked on the debt ceiling increase. but there is no guarantee that they're going to extend similar cooperation on other parts of the agenda. we have to see whether or not partisan warfare actually escalates later in the year or whether we have turned a corner and the president has found a different way of dealing with republicans that's more effective. >> fascinating weekend, john. i think we have some live pictures this morning of the president going to the national prayer breakfast in washington. the president and the first lady at the national cathedral. i think in the motorcade also spotted valerie jarrett, jack lew and some others as well. thanks, john. meanwhile, what's coming up
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tonight on "fast?" >> we'll talk about the natural gas and how it can be converted to other things. and there will be the first nat gas to diesel plant and what that can mean in future. >> you're fired up into. a lot of news. >> i am. >> have a good day. in the meantime, here's what you missed earlier on this morning. >> welcome to hour three of "squawk on the street." here's what's happening so far. >> the good news is investors are positioned for very bad stuff a few months ago and so the starting point for companies and investors has been a lot of caution. as a result, that means people get back to business and spend some money. >> i think we're well positioned in agriculture, we're coming out of a strong latin america season. year over year, our revenues were up 18% and we're setting up for the north american season in 2013.
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>> the margins are the key here. we'll see a high multiple stock 15 times. does still have a news dividend as you pointed out, but investors may be looking closely at that margin number. >> if that stock comes in, you've got to buy it, period, end of story. you have korsky running the period. what has the stock done? it keeps going up. i think he's doing -- he is going to rationalize this this gear. i think he's not beholden to the legacy of weldon. i think he'll get rid of divisions that hurt the company. i want to own j&j. own it. >> breaking news from the national association of realtors existing home sales fell 1% to a seasonably adjusted rate of 4.14 million units in december. that's a big miss. good tuesday morning.
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live here at post 9 with a check on the markets today. the dow hugging the flat line at this hour. down about 2.6%. the dow by the way staging its best january so far since 1996. couple bits of news. brinker in the red after reporting second quarter earnings that were in line with estimates, while revenues did miss the company says chains like chili's have struggled with the consumers. an upgrade at scotia is now sector perform. blackberry 10 upgrades can drive upgrades. and our road map this morning goes like this. the bad news keeps coming for boeing. the quick fix the company was hoping for doesn't look like it's going to happen. so if this problem keeps dragging on, what does the future mean? plus an inside look at the s.e.c. its top enforcer is speaking out. find out how they can prevent
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crime on wall street. then former chair of the fdic joins us with her take on the debt limit. and congressman levin will tell us what needs to happen to get a deal done. but we'll start with boeing. the stock under more pressure following news that the quick fix boeing was hoping for is now unlikely. our phil lebeau has more. good morning. >> there's two paths. there's one they're taking in japan with the jtsb. that's the transportation safety board and then the national transportation safety board here in the u.s. the first incident was reported in japan, that gives you a full perspective on what investors might be thinking now. some will say, well, you're down 5%, but generally we haven't seen a huge sell-off. well, that in part depends on what's going to happen with boeing's production schedule. at this point the company has not changed its 787 dreamliner
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production schedule. still making five per month right now. in washington and charleston and plans to ramp it up to ten per month combined by the end of this year. they have officially halted dreamliner deliveries in part because you can't fly them to test them. therefore, you can't deliver them to your customers. how much is this potentially going to cost boeing? well, howard ruebel at jeffrey's came up with these estimates. if it's just compensation for the airlines it could be $125 million. if it's slower deliveries, then it's $350 million. again, these are just estimates according to howard ruebel. we are hearing from airlines that yes because they cannot fly the dreamliner, particularly your japanese airlines because they have the most of these, they have had to alter their schedules. they have cancelled 320 flights through the 29th. the bottom line is this, they're not expecting to get this back in the air by the 29th. we talked about a quick fix.
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it's looking more and more likely that may not happen, you know, as boeing was hoping by the middle of this week. >> phil, thanks so much for that. incredibly important story. talk to you in a little while. let's talk about what staying grounded might mean for boeing. we have the vice president of the teal group corporation, and he joins us on the news line. welcome back. >> thank you. >> we spoke about this last week when really the troubles were just beginning. i'm wondering was a quick fix ever a realistic assumption? >> i don't know. they certainly were right to push it, but given the faa's determination to clear this plane as the secretary lahood took it 1,000% safe was i think the term he used, it really just wasn't all that much of a starter, i'm afraid. like there was some more work ahead. >> from where you stand and i know we're all longing at this from the outside. although maybe not as much for
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you. the japanese appear to be more interested in the battery than u.s. investigators who were going to start looking at the maker of the auxiliary power unit. looking at wiring, looking at circuit boards. where do you think the focus should be? >> well, right now actually the best case scenario would be some kind of batch of defective batteries. that would be the ideal outcome. and if the japanese can find that working with japan that would be terrific. what people don't want to see is a broader problem. i don't think that's the case, but nevertheless, people don't know what they're dealing with here. the batteries were not overcharged which could have indicated some kind of broader system problem. that was welcome news. so that clears the way hopefully for some kind of defective battery finding. but at this point, everything is open. >> yeah. we mentioned there's a report that investigators are going to
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phoenix today to talk to utc aerospace system. they make the apu. a unit of united technologies. do you believe the speculation that this might be due to not a single cause, but multiple causes? >> well, it's the problem, you can't rule out anything at this point. multiple causes, i don't know, this looks awfully discreet to the battery itself. i think the majority chance is that it's some kind of defective battery batch. it might be this wiring, this installati installation. they'll look at all possibilities. while the architectural is found to be invalid, i think that's exceedingly low. >> in terms of the production, i'm not sure if this is in your universe, but general electric had a conference call on friday in which they said they're standing behind the aircraft. they have not been told by bowing to slow down production of the engines which are going
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on the 787. is it your guess that they'll have to tell boeing we're not making as much of these? >> well, there's no reason they can't continue to ramp up and get to where they want to get to. getting ten a month was always a bit of a stretch. but at least they can head in that direction. i don't think there's any harm in keeping up production. if it's a defective battery batch, again, that's the best of all worlds and they can hit the ground running with the production. there are other issues of course right now even the aircraft that are defective can't return to home base. and receive retrofits promptly or even be looked at except in their -- in the place that they were stuck when the grounding order took effect. so this might again take some time. but on the other hand, keeping production going at the current rampup doesn't look like a bad
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bet at this point. >> interesting. always tough when the planes are out of position. please come back, richard. we always appreciate your guidance. >> a pleasure. let's go over to mary thompson and get a market flash here. >> we're looking at shares of netflix which is down 1.8%. we have jpmorgan raising the price target up to $80. of course the most important thing, the company is reporting the earnings or possibly a loss tomorrow. back in october the company gave broad guidance saying it could lose about 23 cents a share or have a small profit for the quarter. but most importantly what investors will be look foggiings the subscriber group. shares down 1.9%. back to you, carl. david faber has made his way on the set. that can mean only one thing. >> that's right. we've got breaking news here regarding that dell leverage buyout. what we can tell you at this
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point an unexpected strategic investor in the form of microsoft has shown up at the table and in talks in fact with silver lake, the main sponsor behind this leverage buyout. and michael dell as well, of course, being again one of the engines behind it. to invest between 1 and $3 billion in what i am being told by people close to the situation would essentially be a mezzanine financing. most likely taking the form of a preferred of some kind. doesn't necessarily mean that it would be convertible into a significant equity stake in dell. but it is of course a sizable potential investment again between $1 billion and $3 billion is what i'm hearing at this point. and of course you understand it in some ways, given microsoft is very closely linked with dell. certainly the sale of its product is very closely linked with the sale of dell's main product that being the personal computer. now, as for the talks overall
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between silver lake, michael dell and the special committee for dell and dell shareholders, those talks i am told continue. there is hope that a deal perhaps would be reached as soon as the end of this week. but as you might expect, and as is often the case in situations like this, not only are they crossing off and checking off every box in terms of dealing as appropriately as they can with a situation that has inherent conflicts in it, they're still negotiating price. we told you between $13 and $14 a share was the potential price range, and where it lands out is hard to say at this point. no real change at least in terms of the attack. except that it takes time to get everybody to agree to a price. but those talks still going on, carl, but microsoft part of this, of course. a significant one. microsoft not a stranger to having made investments in the
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past. gary kaminsky reminded me they invested in apple. they made a huge invest in comcast years ago and so they are occasionally taken to using part of that enormous cash pile to make these strategic investments. again, it doesn't mean that microsoft will end up with significant equity stake in a private dell, but it certainly has a lot at stake to make sure that company does well, because of course it sells an awful lot of software into the computers. >> your take in general up to now has been the challenge of getting the equity check written even with multiple players. could this change that equilibri equilibrium, that calculus? >> we reported on the equity check was far less than i had anticipated, closer to $2 billion than the $4 billion or $5 million. that in part because they're repatriating cash. >> easier than some thought. >> correct. michael dell is going to be
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potentially taking money from outside dell. and remember he's a vastly wealthy man with a lot of assets outside of dell he's going to be using some of them. so the equity check from what i'm hearing, not a big issue any long longer. silver lake and others will step up behind that. microsoft wanted to get paid for the privilege of being a significant investor, but adding its credibility to this deal. so we'll see whether the deal still happens. you know, you always get a lot of movement, especially before the end. but at least based on what i have been hearing at this point, the outlook is fairly positive they'll reach a deal. perhaps as soon as the end of the week. >> if the point of going private is to reinvent dell, interesting this a player would be microsoft which has an interest in seeing the pc live on a little bit longer, right? >> it does. but of course it would have a seat at the table and be involved in that reinvention wherever it might go. unclear how microsoft shareholders will feel about it, although between 1 and 3, if
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it's $2 billion right in the middle. not an enormous amount of money for microsoft which has tens of billions in cash. but has has had a difficult time figures out what it wants to be after the software business. >> well, the saga continues thanks to you. thank you, david. the s.e.c.'s enforcer is speaking out. get the inside story on how bruce and his team will fight corruption on the street. this . they don't know it yet, but they're gonna fall in love, get married, have a couple of kids, [ children laughing ] move to the country, and live a long, happy life together where they almost never fight about money. [ dog barks ] because right after they get married, they'll find some retirement people who are paid on salary, not commission. they'll get straightforward guidance and be able to focus on other things, like each other, which isn't rocket science. it's just common sense. from td ameritrade.
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s.e.c. has gotten a bad rap in recent years. the agency was highly criticized for the mishandling of the madoff scandal. now they're trying to use new technology and creating specialized units to combat fraud. our gary kaminsky got rare access inside the asset management unit. >> things are definitely changing for sure. i pent some time with bruce karpati. his unit is responsible for investigating allegations of fraud committed by investment adviser and there are approximately 10,000 advisers overlooking $40 million of assets. he contributed to bring 147 enforcement actions against investment advisers just last year. >> i would imagine a mission statement here is free markets, fair markets. explain to me how the department that you're overseeing puts that mission statement to work each day. >> i'm in charge of the asset management unit.
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we're approximately 75 staff with attorneys and experts whose mission is to go after fraudulent investment advisers in the hedge fund, mutual fund and retail space. >> a lot of people lost a lot of money in 2008. are you disappointed that when history looks back at that period that there hasn't been people in jail who were running these firms? >> i can only speak to our own record and it's a civil enforcement agency. we have charged over 150 entities and individuals with crimes relating to the financial crisis. >> i want you to explain to me what happened in that middle period, the 1998 to 2008 period where the s.e.c. -- the fear of the s.e.c. wasn't there and why is it there again now? >> with respect to the financial crisis and the frauds that we saw in 2009 we instituted a number of reforms. one in particular, the introduction of the industry experts. they know where the bodies are buried. for example, we have a former hedge fund portfolio manager. we have a former private equity analyst.
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these people can go into testimony, they can ask the right questions and assist our investigative teams in the ways we didn't have historically. >> there's a thought out there that the type of lawyers that come to work here in this building that they choose to do this type of service because they can't get the high-paying jobs on the other side of the street, so to speak. >> that's a fallacy. >> now the s.e.c. enforcement division had brought more than 1,400 enforcement actions in the last two years. karpati said they have hired highly trained wall streeters. we asked karpati what they're doing to keep up. >> can you give us an example of how the new technology led you to an enforcement action in the sense of this is something that would not have happened five years ago? >> yeah. the best example of that is our look at outlier performance. you know, we looked at managers across the street. for suspicious performance.
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we used technology to come up with algorithms to say this is the outside performance this is smooth performance. out of that, we have brought several enforcement actions without a complaint tip or referral. we are using this technology with mutual funds, with private equity. to look at long-standing practices whether it's cherry picking or soft dollars. >> explain to the viewers what is cherry picking? >> cherry picking is where an adviser allocates profitable trades to himself and allocates losing ones. this is becoming common place. >> if i'm running a hedge fund and i'm playing with the numbers and it shows up on your softball that at least warrants some sort of look at it, some sort of investigation, am i going to know that somebody from the s.e.c. is coming in so i can prepare for it or will you just knock on my door one day and say, we were running model and
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your numbers came up? >> if we see money and it is being stolen outright we'll work with the criminal authorities and figure out what's the best way to get at this. we use our exam staff. our exam staff goes in on risk targeted exams. and then we also open inquiries and start investigations. >> now, bruce mentions 150 cases on that piece. he refers to related to the 2008-2009 crisis. they brought civil actions in the last several years and i will say, obviously, going down there, being in d.c., i came out of there, i can tell you for certain if you're insider trading they're going to find you. these are not typical government agency people who don't know. there's a fallacy out there that they don't know what is happening here in this business. i can tell you if you think that's the case, you are dead wrong. they understand exactly what people are doing and they will find you. >> and now there's this expectation that mary jo white,
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not a policy wonk, but a former prosecutor may run the joint. >> i think those there will welcome this. they talk about civil and criminal litigation. i think they're very disappointed that the criminal side of wall street policing has not been able to put as many people in jail. i think they would welcome somebody like mary jo white who's got the criminal background to get the agencies to work closer together. they're proud of the civil litigation they're able to bring. >> what would you say about the fact they're having this conversation with you? does it raise their expectations? >> i think they want to make the point, because there was a period in the christopher cox led s.e.c. that enforcement was not really considered -- you weren't fearful of enforcement. and they know that's the case. i think they have done a dramatically different job in the last four years and they want the industry, investors and viewers to know it. that's why they gave us the access. i'm convinced that things are very different there. >> we'll see a lot more -- >> yeah, we'll have some more great stuff from the s.e.c.
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series. we'll interview a whistle-blower and then back with an inside look at the s.e.c.'s crime lab. you don't want to miss it. because i have to tell you the software that they have out there that can link people doing things that are bad is going to blow your mind. >> all right. can't wait to see it. thanks. when we come back, will google's next quarter will as rocky as the last? and then later on, former fdic chair sheila bair will weigh in on the debt ceiling. ♪ [ male announcer ] don't just reject convention. drown it out. introducing the all-new 2013 lexus ls f sport. an entirely new pursuit. introducing the all-new 2013 lexus ls f sport.
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technology sector trading slightly lower ahead of google's earnings tonight after the bell. in fact, it's google's first report since that embarrassing mishap in october when r.r. donnelley released the earnings
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in the middle of the day. i'm sure you remember that. they expect to have google show profit gains although it's fallen below 700 today. speaking of which, could he be suggesting sergey brin there's something else that analysts should be looking at? the cofounder spotted riding the subway in new york and yes, he was wearing a pair of google's augmented reality glasses. so we're asking you, what did he see that the rest of us could not? tweet us your answers. straight ahead though, former fdic chair sheila bair will discuss regulation and the bell is about to sound across europe. we'll get their close in a couple of minutes and talk about what the session may look like this afternoon.
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the european markets are closing now. >> interesting data coming in europe, although that's not helping the markets there. let's bring in michelle caruso-cabre caruso-cabrera. >> yeah, you could see it was choppy and spain borrowed a whole lot of money, $6 billion worth. they had no trouble doing so. that helped push the euro to the highs of the day. we're showing you the ten-year yield for spain over the last year. it's down -- we wanted to give you context. remember it was the summer when they were getting very nervous about 7% yields.
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now we're down to 5%. some of the spanish bonds very long term. due in 2041. so they have clearly regained some of the confidence of the markets. take a look at this six-month chart. the big decline in particular of nearly 30% when it comes to their long-term interest rates. european stocks, they were choppy today though. driven in part by a german news report that said german regulators are running a simulation on what would happen if banks were forced to split their retail and investment activities. think of german glass steagall. so they got hit particularly hard, falling more than 3% before recovering off the lows. there were rumors denied by the bank that they'd offer a profit warning. you can see the big hit here. the overall german market improved after the confidence data came out in the country. better than expected. but still, an overall choppy session.
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angela merkel and another leader met today. they met for the celebration, marking the 50th anniversary of the friendship treaty signed by the two countries after world war ii. now this meeting comes as european finance ministers today approved moving toward a financial transaction tax. specifically aimed at reducing the use of derivatives that's why tomorrow u.k. prime minister david cameron is making a pivotal speech about how he feels when it comes to the u.k.'s relationship with the european union. how it should change. he doesn't want a departure from the e.u. reme we ng about that, but some kind of modification. they have more financial transactions to tax than anybody else in europe. i mean, france and germany can say they have no problem with it. that's because they don't have that many of them. so that's why. >> you know, michelle, the big story may be whether or not "downtown abbey's" finances are being mismanaged. >> if they reduce the number of
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seasons because of that, that would be terrible. >> i knew that would get you. thank you, michelle. let's get a check on energy and commodities. >> hey, from europe to asia, we're looking at japan as a key driver in the commodities markets today. of course the bank of japan stimulus plans, something that's helping many commodities including gold and the fact we may see inflation down the road for gold. and we're finding them above the 16 90 level. it looks like it could be a doubtful case for gold to continue its gold run. that something that citi is looking at its inability to sustain above the $1,800 level. that may weigh on the bullish case for gold. that's according to citi. but they are more bullish about platinum. and the platinum group metals. in fact, they have changed the price target for platinum to $1,700 an ounce. and palladium to $775 an ounce.
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raising the price targets there. talking about the strength there. we have seen platinum as the biggest gainer in the metals market so far this year. up 10% year to date. the biggest gainer happens to be gasoline futures. we're looking at retail gasoline prices up 6 cents in the past month. $3.31 a gallon. back to you. >> thank you so much, sharon epperson. courtney reagan is here at the big board, a lot of commodity stocks are moving too. >> that's right, carl. take a look at the commodity stocks. sharon mentioned the bank of japan's measures. and you you have to look at the gold stocks, moving steel stocks that are moving. so definitely a spillover from some of the effects that sharon was talking ago when we talked about the related commodity equities here. if you look at the dow, we are only slightly higher on the day. the dow for the month of january up about 4% which would be its best january since 1997. however, for some context we're
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in a narrow trading range. only a 60 point range. the number of dow components reporting earnings, that's making an impression today. three of the four are higher. travelers, verizon, dupont, johnson & johnson is lower. and the ceo made some cautious comments about the overall economy going forward. it's interesting to read between the lines of what the ceos are saying when they report their earnings. if you look at some of the rail, historic highs for kansas city southern and union pacific. they outperformed the industrials for over a month now. we're watching some of these continue to move higher. back to you. >> talk to you in a little bit. thanks very much. let's get over to mary thompson. watching a name that's going to report later on this week. >> that's right. tomorrow actually coach will report the results tomorrow. right now, the shares are down
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2.1%. clsa cutting the rating to outperform from buy. also lowering the price target as well to $71 from $79. there are concerns that coach is going to report slowing sales in the top market tomorrow. that being north america. earnings right now expected to be $1.28 a share. up 9% from last year. this according to analysts surveyed by thomson. >> look at facebook spiking higher. inching ever closer to the $38 level at which it went public. a lot of discussion about how much resistance is here in the 30s. should you buy now? we'll break down all the headlines when we come right back. this is $100,000.
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whatever your business challenge, dell has the technology and services to help you solve it. coming up on "halftime" did the verizon ceo hint at ending subsidies on the conference call? we'll have the details on a story that's pressuring stores of apple. tech's make it break it week. can earnings can turn it into a laggard into a leader? and speculation swirls around dell. one big debate. see you in 20 minutes. >> thanks a lot. check out shares of dell as you might have heard earlier in the hour, david faber reporting that microsoft is in talks to invest $1 billion to $3 billion as part of dell's leveraged buyout. sort of mezzanine financing. not clear what kind of say they'd have once the company
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does go private. if in fact it does. but we're watching the shares closely which popped on faber's reporting. i want to check back in with simon hobbs in las vegas. this time, with former fdic share sheila bair. hey, simon. >> you know, what's really interesting people as they kick off the discussions are beginning to realize this may -- america may be the most optimistic launching geography anywhere in the world. one of the reasons for that is because there's a lack of supply. if you're in the game you don't need to worry about the cycle because the financing was so crushed in 2008 and 2009. that's why when sheila pare, former head of the fdic, gives her lecture or keynote speech later on, she will be talking about lessons that need to be learned from where we have gone. good morning. >> exactly. >> what would you say to them? >> well, i think hopefully i won't bore them to tears but i want to talk about bank and capital requirements. one of the reasons there was
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such a credit contraction during the crisis, too many banks had too much leverage. they weren't sure they had enough capital from all the bad mortgage loans they made. we were trying to get the capital levels raised and include something called the capital conservation buffer. when we get into a down turn, they can dip below and keep lending. >> that's all academic. they want to know when are the banks going to lend now? why are the banks still not lending now? >> i think it's gotten a little better. it was off prior to the crisis, so we don't want to get back to the go go years. there are a couple of things. the interest rate environment is weighing on bank lending. i know it's well intentioned by the fed to get real economic growth in the zero interest rates. if you're looking at a higher, you know, along with some credit risk going out for a multiyear period with the low interest rates i think it makes you risk
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averse. they don't want to lend unless they can move it off the balance sheets. >> you've got private equity that's coming together or a couple of hotels around here have been financed by people, foreigners who want a green card. >> right. >> so they're coming -- >> okay. >> is that -- >> you can issue a lot of unsecured debt and use cash to make your acquisitions, your developments too. >> do you think the public policy, the feds should be doing more to support this or just not relevant? it's animal instincts? you have to wait. >> look, i think -- my personal view and i have been a long-standing critic of the near zero interest rate policies. they have hurt lending, they don't help it. i think the markets feel they're being manipulated. they are being manipulated a little bit. it would be nice to get away from economic growth, just focused on low interest rates which gives you cash, you know -- excuse me, somewhat bounces in the bond and stock
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market. let's get some real economic growth, just not manipulation of interest rates. >> as we wait to get real economic growth, we have the whole debt ceiling debacle. where are you now? you have seen the offer from the republican, are you taking heart? >> well, i am. i hope the democrats take it. it's not perfect, but it's three months. look, we are talking about the wrong thing. we are talking about the vehicle to come to some type of agreement on long-term fiscal responsibility. we need to be talking about getting these -- the national debt as a especially of gdp growth on some type of sustainable trajectory. whether it's -- it's a short term or a long term issue, and if we don't address the long term problem we're still going to be focusing -- facing eventually a reduced confidence in our full faith and credit. probably more ratings downgrades. those are results that we should avoid at all costs. >> not cool for austerity. >> no, it's a call for responsibility. it should be done over the long
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term. do it now. because the longer you wait the more difficult it comes. you have the huge deficits that makes the debt bigger. the gdp growth will not support the growth at that level. do it now. even with entitlement spending, if you start making some smaller incremental changes now, but that will build over a period of years when the trust funds run out of cash, it will be much further in the future. if you wait until they run out, you'll have difficult and harsh decisions. >> why don't you bite the bullet and go into politics? seriously. >> because, listen, i try to be part of the policy debate and i had through any nonprofit work am part of the policy debate. >> but you could do more. you can put your money where your mouth is and get in the fight. >> i did run for office once and people asked me to do it. i hate the way that money corrupted the process. i don't want to get into the fund-raising cycle.
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i think they're getting disheartened to raise funds to keep running and having that drive decisions as opposed to what's good for the country. i think it's discouraging a lot of good people. campaign finance reform, how we elect and re-elect public officials has got to be part of the solution to the dysfunctionalty we see in washington in -- >> in the meantime, enjoy the weather. back to you. >> simon, thanks so much. couple of positive notes from analysts pushing facebook sharply higher today. our julia boorstin is live in l.a. with the details. >> good morning to you. that's right. facebook shares were up as much as 4% higher this morning. there seems to be a growing consensus that facebook will figure out the mobile ad business. oppenheimer notes that it's not hurting user engagement pointing to numbers from december that show facebook growing its lead over its rivals.
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also bouncing off those numbers, cantor fitzgerald reiterated the buy rating, making more money on mobile and on optimism about the new ad formats. hillside partners unveiled some new research showing growth in users as well as small business spending on facebook ads. and topeka raised the price target to 40 bucks saying that facebook's new graph search, quote, holds tremendous promise for both engagement. and today's jump comes after the much-hyped launch of graph search. the mystery announcement won't immediately boost revenue prompted a pull back of a few percentage points. even with last week's pull backs, facebook has been up 55% in the past three months as confidence grows in the company's ability to make money off the growing user database. all eyes are on the fourth quarter earnings which are due out after the bell next wednesday. the 30th. we'll have to see if the social
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network lives up to these higher expectations. >> julia, going to be a busy week all around. the debt limit debate is going to heat up. ranking member of the house ways and means committee sander levin will meet with us right after the break.
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welcome back to "squawk on the street." the fifth best performing stock on the s&p is up 3.5%.
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the adjusted earnings coming in actually as earnings reversing the year ago loss, 22 cents a share. they did see an increase in loans to middle market firms and auto loans. the total loans did decline 5.2%. however, investors are cheering the news of that reversal from last year's loss. carl, back to you. >> not a bad looking chart. thanks so much, mary. keep the tweets coming in. i don't know if you saw this picture of sergey brin spotted riding the subway over the weekend. the tech company's augmented eye wear. what did he see that the rest of us could not? tweet us and we'll get your answers in the next ten minutes.
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i'm sharon epperson with news that's of great performance to the oil markets here in the united states. nebraska has approved a new route for the keystone xcel pipeline. this for a controversial pipe line that is operated by transcanada will avoid the sand hills region that is a region
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that was of great concern to a lot of environmental groups and now the nebraska governor has sent a letter to the president, saying that he has approved a new route that would avoid this area. of course, transcanada has said this pipeline will create thousands of jobs. we are looking at oil futures right now, near the highs of the session. the march contract, above 96.50. >> before i let you go, just -- it's amazing to think back at the path this pipeline has taken. the saga from the genesis of it to the actual project itself. this area that was so controversial, what was the complaint? what did people say that the pipeline would either damage or destroy? >> they were very concerned about the groundwater in that area. and a lot of environmental groups were concerned about the contamination of the water in that region. now the nebraska governor says that the new route will bypass this area that was very environmentally sensitive and hopefully we will see whether or not this finalizes it and goes
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through. but as you said, there have been so many different hurdles from the state department, many different groups that have had to approve this. we'll see how it goes from here. >> yeah. of course, transcanada saying the project is safe. obviously the job creation is nothing to shake a stick at either. >> absolutely. >> thanks. the house ways and means committee will hold a hearing on the debt limit in over an hour from now. meantime, house republicans will vote tomorrow to extend the debt limit until may. congressman sander levin is the top democrat on the ways and means. he joins us this morning from the nation's capital. good morning. >> good afternoon. >> okay. maybe -- >> almost. >> we'll give you the five minutes past noon. tell me about this may 19th date. does that seem reasonable and is it enough time to make this debate a little less contentious, a little more constructive? >> i hope so, but i think the three-month extension is basically not a good idea. i think it includes a lot of --
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lot more uncertainty. i think the stock market doesn't want that. i don't think our economy doesn't need it so i really think that we should not be using the debt ceiling for leverage. i think it's bad for the economy. >> you have said that in terms of finding ways to raise revenue, the president's proposed limit on tax deductions is the most likely path. can you walk me through how you see this thing happening? >> well, there have to be more revenues. we have to as the president said yesterday have a balanced package in deficit reduction. and i think looking at the deductions will be one route doing that. we have to be careful. i have made that clear. but we're going to have to look at that. as one of the techniques to raise revenues it has to be balanced. we need to look at cuts in programs, discretionary programs have already been cut. we need to be careful.
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we need to remember what's at stake in those programs. we need revenues as well as program cuts. >> obviously, we have a lot of investors, people who watch the markets, watching us right now. this idea of repealing carried interest tax breaks, are you in favor of that and do you think that idea would make its way through the house and senate? >> we have to look at it. i have been advocating it for a long time. i think having a capital gains rate for essentially providing services for other people is not consistent with equity or a balanced tax code. i have made clear we have to look at the issue of enterprise values. we do that, we clearly carry interest on the table. i think we need to work together to have an equitable tax reform. we have to do that and make sense of our tax code. i think having a capital gains
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tax rate when you provide services for others a lot of people are providing services for others and they pay ordinary income tax on it. we have to look at it. >> you said at the same time that you'd like to keep the proposal to -- when it comes to the deduction for state and local taxes you want to be more cautious on that. than maybe on carried interest. is there a litmus test you're using as you go from proposal to proposal? >> no, look, we have to be care. -- careful, but we have to be active. we have to look at more revenues as well as program cuts. so we have to put these issues on the table and think them through. we have been working on the carried interest for a long time. state and local taxes i think we have to look at it so we don't put more pressure on municipalities and states to meet their budget needs. we have to look at the bond issue, for example, but carefully. so